For the first two years of the war or more the shipyards of the country had lost their men and the work had become dislocated. Hulls had been on the slips for very long periods and there was no material in existence to finish them. Vessels were lying in the yards awaiting engines, but the engines had never been built, because up to 1917 the Admiralty had made use of the engine shops for naval work. There was great confusion in the shipbuilding industry, not due to the fault of the industry, not really due to any one's fault, but due to war conditions. The output had been checked by urgent work being placed in the same works by different departments. With the introduction of the Controller's Department it was immediately realized that this policy was bad for output as a whole. It was accordingly arranged to allocate yards or separate sections of yards, so that one class of tonnage only would be produced. The result is that forty-seven large shipyards, containing 209 berths, are wholly engaged on ocean-going merchant vessels. That is entirely apart from the large private warship building establishments, which are obviously most suited for naval work. But there are in addition eleven--and only eleven--other yards suitable for large merchant tonnage which have at the present time naval craft on the stocks. [Illustration: HENRY P. DAVISON Chairman of the War Council of the American Red Cross Society (© _Harris & Ewing_)] [Illustration: The actual surrender of Jerusalem, Dec. 9, 1917, when two British outposts met the Mayor (carrying a cane) and his party with the white flag. The formal surrender took place next day. (© _American Colony Photographers_)] I now give the figures of output in the yards. In the fourth quarter of 1914 the merchant tonnage produced in the United Kingdom was 420,000. From that date it steadily fell, and it must be noted that the fall was concurrent with our great munitions effort. In the fourth quarter of 1915 it had fallen to 92,000. It then began to rise, and the rise is as follows: 1916 Tons. Tons. 1st quarter 95,000 3d quarter 125,000 2d quarter 108,000 4th quarter 213,000 1917 Tons. Tons. 1st quarter 246,000 3d quarter 248,000 2d quarter 249,000 4th quarter 420,000 These figures refer to the British Isles alone. In the fourth quarter of 1917 foreign construction was 512,000 tons, giving a total output for the world, exclusive of enemy countries, of 932,000 tons for the last quarter of last year. Against that we have the losses due to enemy action and to maritime risk. THE MONTHLY DEFICIENCY